Info appliance market set to take off

The information appliance market is set to explode, according to a new survey, and it will be driven by the couch potato.

3 January 200212:43 am GMT

The information appliance market is set to explode, according to
a new survey, and it will be driven by the couch potato.

Television-based services and Internet content will drive the growth of
so-called information appliances, according to the new report from International Data Corp. The term refers to
a wide range of computing devices, often with specific tasks such as email
access.

By leaps and bounds
The information appliance market is expected to surge during the next four years.

1999

2004

Units

11 Million

89 Million

Revenues

$2.4 Billion

$17.8 Billion

Source: International Data Corp

TV set-top boxes offering interactivity and online services from cable and satellite TV
providers will be the first of a new wave of Internet technology hitting the
home, in a market IDC says will eventually outpace even consumer PCs.

Overall, the market for devices, including set-top boxes, handheld
computers and gaming consoles, is set to grow from 11 million units shipped
in 1999 to 89 million units in 2004. The market will grow from revenues of
$2.4 billion last year to $17.8 billion in 2004, according to IDC.

Already, major PC companies such as Compaq Computer and Dell Computer are
releasing
versions of information appliances, while almost every day a
start-up announces a novel way of connecting the Internet to everything from typical
home appliances, such as microwaves and refrigerators, to picture frames.

However, the first services to take off with consumers will likely be
incremental and come from cable companies and satellite providers, according
to IDC's Kevin Hause, because television viewers are already used to paying
for services from these companies.

Over the next few years, handheld computers and gaming consoles will take
off as well, he said. For example, the game console market grew from almost
no units shipped to 1.5 million units, on the strength of the mid-year
introduction of Sega's Dreamcast alone.

Outside of those few products, the industry will see a lot of
experimentation as a wide assortment of hardware manufacturers, service
providers and home appliance companies hook up to create all sorts of
"smart" devices. Few of these will actually succeed, Hause predicts.

"There's going to be a lot of experimentation and a lot of failures as these
companies are looking for the appropriate mix of product services and
price," he said. Already, there are some indications that the most
successful information appliance strategy will be to sell the hardware for very
low cost, as companies experiment with subsidizing
these costs through service contracts and e-commerce revenues.

"A lot of
business models are being considered. The most successful ones will find
ways to subsidize hardware by e-commerce, services or advertising," Hause
said.

The emerging market is likely to resemble the PC world in one respect,
though: It is likely to be dominated by existing players like Microsoft,
AOL and Yahoo.

"It's important to note that users are going to demand an integrated
service--if they already have AOL they're not going to pay another 20 bucks a
month for another service--and they're going to want the same email and same
messaging account," throughout their home, he said.

"The two companies working most publicly at developing integrating services
are AOL and Microsoft. In terms of applications, Yahoo and the other portals
are very closely following."